Bank levies penalty on MAB exempt minor's account

Bank levies penalty on MAB exempted minor’s account

Concerned bank drags feet, parent take it to the banking ombudsman, gets penalty amount reversed.

By

Debkumar Bhadra

To have an idea of how the banks are draining customers deposits to fill its own coffers, take a look at this : According to information presented by government in the Lok Sabha, Indian banks collected Rs 10,391.43 crore between April 2015 and September 2018 by charging customers for just two things – one failure to maintain minimum or monthly average balance (MAB) in their account and two for exceeding the number of free ATM transactions in a month.

This amount is huge, not only because it is more than what Vijay Mallya reportedly owe to banks (Rs 9,000 crore) or it being more than the budget allocation for India’s first man mission to space – Gaganyaan (Rs 10,000 crore). For a country which has just taken first step towards financial inclusion, it is unfortunate as well since this amount has been amassed from ordinary citizens who could not afford a minimum balance in their account.

Numerous complaints pouring in from different quarters of the citizenry point to the enormity and exploitative conduct of banks vis-à-vis levy of penal charges. One among them is my personal experience wherein SBI imposed penalty on my minor son’s MAB exempted account for non-maintenance of MAB. But before going to the issue let us first take a look at what the guideline says.

RBI guideline on levying penalty 

Simple reading of the guideline issued by Reserve Bank of India (RBI) indicate when any account falls short of minimum balance requirement, bank should notify the account holder through SMS/email or a letter. Bank should also allow a month to restore the balance from the notified date; if not, then penalty will be applicable.

Secondly even if customer is unable to maintain the minimum balance, banks cannot levy charges such high that the balance in the account turns negative. Instead, the bank could restrict the services available to that of basic savings bank deposit account. Once the balance is restored, then bank should convert the account back to a regular one and restore all the features given earlier.

Also savings accounts opened under Pradhan Mantri Jan Dhan Yojana (PMJDY), Small accounts, Basic Savings Bank Deposit (BSBD), Pensioners, Minors and all social beneficiary accounts are exempted from MAB requirements.

Bank contradicts

Going against both the RBI and its own stated policy, SBI levied penalty on my minor son’s savings account during two consecutive months for non-maintenance of MAB, without intimation to any of the account holders. Had I not checked the entries the other day, am sure, the bank would have siphoned off the deposits until balance in the account was reduced to zero.

The point to ponder is the account holder being a minor (8 years on that date), he is barred by law from earning thus he cannot and hence does not have any income. Therefore it is incomprehensible as to how a minor would pay penalty, more so, when the account is meant to be Zero Balance opened under Pradhan Mantri Jan Dhan Yojana, which according to the bank itself is exempted from MAB requirement.

What is surprising is that despite a certain sum was deposited in his account then and there to meet the minimum balance requirement, the bank still did not spare the minor and went on to levy penalty the following month as well.

However, since guideline was flouted and penalty already levied, all one could do is bring the matter to the notice of the bank which I did in person as well as in writing stating the account holder being a minor and that the account is intended to be “Zero Balance” account opened under PMJDY, it is exempted from MAB requirement. Therefore levy of penalty must stop and the amount that has wrongly been deducted be reverted to the account. The officer at the desk, while accepting the wrong promised action on my complaint, but did not act for about a year.

Had levy of penalty been reasonable and in line with cost of providing services as mandated by the banking regulator, a customer would have nothing to complain. But looking at various reports and from my personal experience, it turns out that banks has been flouting RBI norms and making windfall gains out of it. From the figures presented by the Govt (Rs 10000 crore) one can very well imagine how harsh the bank had been on its unsuspecting customers.

Bank drags feet, customer approaches banking ombudsman

Despite the matter been brought to the notice of the bank not once, not twice but thrice in writing and more than twice that number of personal visits, the bank did not pay any heed to whatever I said or wrote.

Finding the bank dragging its feet for close to a year, I decided to knock the doors of Banking Ombudsman. Within a week of the ombudsman finding my complaint maintainable and accepting it, I received a SMS on my phone stating the bank had been trying to contact me and that the manager would like me to visit the branch. I had a sense of satisfaction. The bank which remained deaf for close to a year, is finally trying to communicate. I could also feel the urgency, but did not respond to the message since I had nothing more to add to what had already been said and written.

About an hour later, a known face knocked at the door. He was carrying the message right from the horses’ mouth. He informed a new manager has recently joined and intends to resolve my complaint. She tried to contact me over phone failing which the SMS has been sent. Since there was no response from my side, the manager requested him to personally convey the message. At this point I looked at the clock it was 9 PM in the night.

The following Saturday (being holiday for me), I visited the bank and met the manager. Thus the issue which had been lingering for the past one year, after intervention of banking ombudsman, met its logical conclusion with the entire penalty amount reverted to my son’s account. Point is how many of us could endure such prolonged battle or toil to correct a wrong, which he did not commit? Well when it comes to one’s children, every parent would love to do so. So did I.

Regulator need to intervene

The amount collected by banks on account of MAB penalty in the last three years is not a small amount. Moreover this has been amassed appropriating savings of that strata of the society who are not in a position to afford a paltry deposit in their accounts. Even MAB exempted accounts including that of minors are not spared. Therefore the government specifically banking regulator, need to take cognizance of the issue and put in place suitable mechanism to end the exploitative levy of charges by banks. In no case banks must siphon off deposits from customers account and reduce it to zero.

Remain alert, avoid penalties

Many salaried people hold multiple accounts and as they change jobs or shift to new cities, one or the other account becomes inoperative. In such cases, banks may convert zero balance salary accounts into regular savings accounts after a couple of months, as there are no salary credits. So, we need to remain alert and maintain a minimum average balance in such non-salary savings accounts. It is better to close such accounts. Make sure EMIs and investments are linked to accounts that are regularly used and maintain minimum balance. Also, make use of net banking facility to periodically check the entries carefully and ensure balance is adequate to meet the bank’s requirements.

Word of caution

Keep your bank details secured. Never share account number, card number, ATM pin, OTP, CVV, Expiry date or any other detail with anyone, however genuine they may appear. Tell yourself and to other family members including children to never respond to unsolicited phone calls or SMS’s seeking bank details.